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DA advises parastatal sell-off

Article By: Linda Ensor

Tue, 21 Feb 2012 4:13 PM

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DA Parliamentary leader Lindiwe Mazibuko. supplied

The Democratic Alliance (DA) is proposing a R55,4-billion sell-off of state-owned enterprises (SOEs) to accelerate the government’s infrastructure investment programme and boost growth without raising the budget deficit to unsustainable levels.

Privatisation was just one of a number of proposals the DA made in its "alternative budget" for 2012, released at a media briefing yesterday ahead of the tabling in Parliament tomorrow of the budget by Finance Minister Pravin Gordhan. The package was aimed at expanding employment, accelerating economic growth to reach 8% over the medium term and halving poverty. It would result in a budget deficit of 5,1%, slightly below the 5,2% projected by the Treasury for 2012-13.

However, selling off assets is not a proposal likely to resonate either with the government, which is committed to the notion of a developmental state involving even more state intervention in the economy than at present. Nor is it likely to be well received by the Congress of South African Trade Unions (Cosatu) which is strongly opposed to any form of privatisation.

Nevertheless, DA finance spokesman Tim Harris insisted privatisation was preferable to escalating transport and electricity tariffs, which undermined SA’s global competitiveness and was in line with the "Brazilian model" as seen in the recent sale of a 51% stake in Sao Paulo airport for more than R70-billion.

The DA argued that it was essential for state expenditure on infrastructure to increase from 7,8% of gross domestic product to the more desirable 10% (about R330-billion).

Mr Harris and his deputy David Ross said the DA’s proposals would result in R115-billion being spent on infrastructure by the government (R20-billion more than projected by the Treasury for 2012) and R55,4-billion being derived from asset sales. In addition, state-owned enterprises would raise R160-billion off their balance sheets.

Included in the basket of assets which the DA believed should be sold off were SAA-SA Express (R2,9-billion), 30% of Eskom’s power generation capacity (R26-billion), SABC (R850-million), Denel (R654-million), South African Forestry Corporation (R708-million), Broadband Infraco (R1,6-billion), 30% of Portnet’s assets (R13,5-billion) and assets held by the Industrial Development Corporation (R9-billion).

"Many of these SOEs need regular bail-outs and massive guarantees, which place strain on the fiscus," Mr Harris said. A key DA proposal on the job creation front would be the immediate implementation of the youth wage subsidy which Mr Gordhan proposed in last year’s budget, but which has since been snarled up in the National Economic Development and Labour Council process where it has met with stiff resistance from Cosatu.

Other elements of the DA package included offering small businesses R240-million in tax breaks to assist with cash flow, a R300-million scheme to promote share ownership for employees and providing grants to employers to fully reimburse them for training costs. It would also involve radical pruning of wasteful state expenditure. The party proposes to abolish estate duties and a donation tax at a cost of R1-billion and slice R5,7-billion off corporate taxes.

Congress of the People finance spokesman Nic Koornhof called for restraint in public sector wage increases and said the budget should project "a clear message of stability and fiscal consistency". African Christian Democratic Party MP Steve Swart expressed concern about the budget deficit, state debt and spiralling debt service costs.